Earworms, Old McDonald, and Reg E

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An earworm is a snippet of music that repeats over and over as an involuntary soundtrack in a person's mind. Literary references to earworms can be found everywhere from the short stories of Edgar Allen Poe to modern science fiction where it may end up being a real worm (yuck!). Scientific study shows people with obsessive-compulsive disorder or musicians are the most likely to suffer an earworm attack.

Humming on the way to work in the car the other day, the old nursery rhyme about Old McDonald the farmer got stuck in our head. As we hummed EE I EE I OH we got thinking and when we got to work did a bit more research. According to a World War I era songbook, the farm was actually located in Ohio and the original words to the song were OH HI O, with no EE to be found.

After all this constructive research about EE, I and OH, obviously Regulation (Reg) E popped to mind of course. Perhaps that is because the deadline for compliance for this consumer international remittance rule is right around the corner (Oct. 28). Since our solution is ready and working and since we have already given probably hundreds of demonstrations to help bankers prepare, we clarify some of the questions that have surfaced in case you are wondering whether this rule applies to your bank or not.

At the highest level, consumers in the U.S. send billions of dollars abroad each year and Dodd Frank expanded the requirements for certain international transfers ("remittance transfers"). To implement the requirements, the CFPB issued a new rule (Reg E) that requires banks (and others) that do remittance transfers to give their customers certain disclosures and establishes cancellation and error resolution procedures.

Going a bit deeper from our customer training and discussions with community bankers, there is some confusion on who needs to comply. Basically, if your bank supports customer remittance transfers of more than $15 requested by consumers in the U.S. and sent to people or companies in foreign countries, then you will need to keep reading. Under the rule, transfers include international transfers, cash-to-cash money transfers, international wire transfers, international ACH transactions, and certain prepaid card transfers. It is important to understand that remittance transfers larger than $15 count toward the 100 count safe harbor threshold (banks that do fewer than 100 transfers in a given year are not considered to be providing transfers in the normal course of business so are exempt from the requirements).

The question that comes up is which kinds of transactions need to be counted toward the 100 transaction threshold. Remember that you need to count all types of remittance transfers covered above by the rule together (so 60 international wire transfers and 50 international ACH transactions would exceed 100).

One area that has been a little less clear is when another intermediary like a domestic correspondent is involved. For example, Bank A takes money from a consumer and is sending it to her grandmother in Japan. Bank A does not provide the transfer services itself. Instead, they use a domestic correspondent to transfer the funds. Under the rule, Bank A (because it took the money from the consumer), must count this transaction towards the 100 count, even if the transfer itself takes place through another bank.

This is all about how your bank needs to handle disclosures and error resolution when consumers send money from here to somewhere else in the world (business senders are not included in the rule). Since international services is one of the few areas where community banks can still get fee income and since more and more business is done globally it is important to know the rule but not let it concern you. There is no reason to send good customers down the street to a competitor over providing services yourself that can keep your customer happy.

PCBB's Reg E solution is already in place and we are happy to train you how to capture and keep these customers. Our solution is simple and comprehensive and will help your bank keep count of your transactions - even if you don't need to comply or aren't really sure. There aren't many comprehensive Reg E solutions ready to go out there right now, but ours is ready to roll and available for you now. The requirement starts in just 21 days, so get ready now and you can just sit back and hum a happy tune, as this worry is removed from your brain. Call us to see a demo.

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Copyright 2018 PCBB. Information contained herein is based on sources we believe to be reliable, but its accuracy is not guaranteed. Customers should rely on their own outside counsel or accounting firm to address specific circumstances. This document cannot be reproduced or redistributed outside of your institution without the written consent of PCBB.